Tudville Pty Ltd and Chief Executive Officer of Customs

[2008] AATA 178

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 178

ADMINISTRATIVE APPEALS TRIBUNAL                No.  2007/1357

GENERAL  ADMINISTRATIVE  DIVISION
Re		TUDVILLE PTY LTD

Applicant

And CHIEF EXECUTIVE OFFICER OF CUSTOMS

Respondent

DECISION

Tribunal: G.D. Friedman, Senior Member

Date:3 March 2008

Place:Melbourne

Decision: The Tribunal affirms the decision under review.

(sgd) G.D. Friedman

Senior Member

CUSTOMS AND EXCISE - tariff classification - unwrought hollow bronze cylindrical bars - whether tubes and pipes - whether extrinsic material should be used

Customs Tariff Act 1995 ss 7(1), 15, Schedules 2, 3

Anite Networks Pty Ltd v Collector of Customs [1999] FCA 26

Barry R Liggins Pty Ltd v Comptroller-General of Customs (1991) 32 FCR 112

Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591

Cody (Collector of Customs) v Datacraft (Australia) Pty Ltd (1989) 19 ALD 145

Collector of Customs v Chemark Services Pty Ltd (1993) 42 FCR 585

Gardner Smith Pty Ltd v Collector of Customs (1986) 66 ALR 377

Liebert Corporation Australia Pty Ltd v Collector of Customs (1993) 23 AAR 287

Re Gissing and Collector of Customs (1977) 14 ALR 555

Re Sterns Playland Pty Ltd and Collector of Customs (No.2) (1982) 4 ALD 562

Re Tridon Pty Ltd and Collector of Customs (1982) 4 ALD 615

Re Tubemakers of Australia Pty Ltd and Collector of Cusotms (1980) 3 ALD 199

Times Consultant Pty Ltd v Collector of Customs (Qld) (1987) 16 FCR 449

REASONS FOR DECISION

3 March 2008  G.D. Friedman, Senior Member

1. Tudville Pty Ltd imported copper alloy (bronze) continuous cast hollow cylindrical bars for use in automotive and general engineering industries. The respondent directed Tudville to classify the goods under tariff subheading 7411.29.00 of Schedule 3 of the Customs Tariff Act 1995 (the Tariff Act) as copper tubes and pipes: other.  Tudville claims that the goods are not tubes or pipes and should be classified under subheading 7403.29.00 as refined copper and copper alloys, unwrought: other copper alloys (other than master alloys of 7405.00.00).

ISSUES

2.        The issues before the Tribunal are whether the goods are tubes and pipes, and, if so, the appropriate heading under the relevant classification.

WHAT ARE THE GOODS?

3.        Mr J. Maxwell, Managing Director of Tudville, told the Tribunal that the company imports a minimum of 250 kilograms of each size of the goods in container-sized shipments.  Each size is imported in lengths of 3.05 metres.  He said that the goods are cut into smaller segments and used primarily as a bush, which is a metal lining placed between two pieces of metal to take the wear and tear between each piece of metal.  The bush is generally cylindrical in shape, machined to the desired size and cast as hollow to save money and machining time.

4.        Mr Maxwell stated that the goods are also used widely in applications such as spacers (to keep two pieces of metal apart), wearings, light gear wheels in small winches, reduction gear wheels and pinions in conveyer systems.  The goods are used in machinery such as earth moving equipment, fork lifts, hydraulic machines and engines.  Mr Maxwell acknowledged that invoices from the Chinese exporter referred to the goods as pipes.  However he said that although the goods are the same shape as a tube or pipe he has never seen them used to transfer liquids or any other materials as they are not suited to that purpose. He emphasised that the goods are not regarded as tubes or pipes by anyone who has any dealings with them.

5.        Dr L. Cubitt, consulting engineer, stated in a report (Exhibit A4) prepared on behalf of Tudville, that a tube or pipe is generally made from steel, aluminium, concrete or plastic and is used to convey a fluid or as a structural element in a building.  He said that the imported goods are used as feed stock in the manufacture of bushes and mechanical components, and are hollow to reduce the amount of machining required when compared to machining items from solid bronze material.  He said that he has never seen cored hollow bronze used as a structural element, and the material is too thick and costly to convey fluids.

6.        In his report Dr Cubitt said that he had provided samples of the imported goods to Dr I. McKee, materials consultant.  In cross-examination Dr Cubitt agreed that the goods resemble tubes or pipes, and that Dr McKee had described the goods as tubes.

7.        Mr R. May, corrosion material consultant, stated in a report (Exhibit R2) prepared on behalf of the respondent that he examined photographs of the imported goods.  He concluded that, based on the information provided by Dr Cubitt regarding typical end uses of the items, the goods are copper tubes and pipes as described in Schedule 3 to the Tariff Act.

WHAT IS THE TARIFF CLASSIFICATION PROCESS?

8. Section 15 of the Tariff Act provides for the imposition of customs duty on goods imported into Australia. The rate of duty is determined in part by the classification of the goods. Schedule 3 of the Tariff Act sets out the headings under which goods are classified. Section 7(1) of the Tariff Act directs that the Interpretation Rules found in Schedule 2 must be used when determining the tariff classification of a particular item.

9. The method of classifying goods requires identification of the goods and then allocation of a classification under the appropriate headings in Schedule 3 of the Tariff Act (Re Gissing and Collector of Customs (1977) 14 ALR 555).

HOW SHOULD THE GOODS BE IDENTIFIED?

10.      In making an identification the Tribunal has applied the principles in Re Tridon Pty Ltd and Collector of Customs (1982) 4 ALD 615 and has made an objective and informed appraisal and inspection of a sample of the goods and their distinguishing characteristics (Re Sterns Playland Pty Ltd and Collector of Customs(No.2) (1982) 4 ALD 562) at the time of importation (Times Consultants Pty Ltd v Collector of Customs (Qld) (1987) 16 FCR 449). This has been done as a notional wharfside inspection (Anite Networks Pty Ltd v Collector of Customs [1999] FCA 26).

11.      One of the principles of identification, as set out in Re Tridon states:

Identification will frequently extend to characterisations of goods by reference…to their suitability for a particular use where those characteristics emerge from informed inspection of the goods imported.

12.      In Re Tubemakers of Australia Pty Ltd and Collector of Customs (1980) 3 ALD 199 the Tribunal held that light weight steel tubes exhibited characteristics which established its commitment by manufacture to use as parts for a cycle frame. The Tribunal declined to identify the goods generically as tubes of steel and proceeded to identify the goods as part for a bicycle frame.

13.      In this case, the subject goods are specifically made out of copper alloy (bronze) and used primarily to bear the wear and tear between two pieces of metal.  Unlike Re Tubemakers the goods are not manufactured for a specific purpose and can have wide applications.  The goods also have to be substantially altered for most purposes.

14.      The Tribunal has considered the goods themselves in the condition in which they were imported, and not the intentions of the importer or the overseas supplier (Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (Vic) (1987) 72 ALR 591) or the intended use (Collector of Customs v Chemark Services Pty Ltd (1993) 42 FCR 585). The Tribunal identifies the goods as 3.05-metre hollow sections of unwrought copper alloy (bronze) in cylindrical form.

CAN THE GOODS BE CLASSIFIED UNDER SUBHEADING 7403?

15. Subheading 7403 of Chapter 74 of Schedule 3 is: Refined copper and copper alloys, unwrought.  Note 1(b) states:

Copper alloys

Metallic substances other than unrefined copper in which copper predominates by weight over each of the other elements, provided that:

(i)the content by weight of at least one of the other elements is greater than the limit specified in the foregoing table; or

(ii) the total content by weight of such other elements exceeds 2.5%.

As the goods are refined unwrought copper alloys they can be classified under subheading 7403, and the appropriate classification is 7403.29.00: refined copper and copper alloys, unwrought: other copper alloys (other than master alloys of 7405.00.00).

CAN THE GOODS BE CLASSIFIED UNDER SUBHEADING 7411?

16. Subheading 7411 of Chapter 74 of Schedule 3 is: Copper tubes and pipes.  Note 1(h) states:

Tubes and pipes

Hollow products, coiled or not, which have a uniform cross-section with only one enclosed void along their whole length in the shape of circles, ovals, rectangles (including squares), equilateral triangles or regular convex polygons, and which have a uniform wall thickness. Products with a rectangular (including square), equilateral triangular or regular convex polygonal cross-section, which may have corners rounded along their whole length, are also to be taken to be tubes and pipes provided the inner and outer cross-sections are concentric and have the same form and orientation. Tubes and pipes of the foregoing cross-sections may be polished, coated, bent, threaded, drilled, waisted, expanded, cone-shaped or fitted with flanges, collars or rings.

17.      In Liebert Corporation Australia Pty Ltd v Collector of Customs (1993) 23 AAR 287 the Full Federal Court stated at 289:

The appropriate tariff classification is to be determined according to the terms of the headings (which includes subheadings) and of any relevant Section or Chapter notes…

The Tribunal has identified the goods as 3.05-metre hollow sections of unwrought copper alloy (bronze) in cylindrical form, and accepts Mr May’s evidence that they have the necessary characteristics of shape, cross-section and thickness to bring them within the specific definition in Note 1(h).

18.      There is no requirement in Note 1(h) for consideration to be given to ordinary or trade usage of pipes and tubes and whether the goods are used for the conveyance of fluids or other materials, or for any other purpose, so the plain meaning of the words in the Note should be adopted.  In any event the Tribunal notes that the Macquarie Dictionary gives a wide meaning to pipe and tube, which would appear to include the goods.  It defines pipe as:

…1. a hollow cylinder of metal, wood or, for the conveyance of water, gas, steam etc.; or for some other purpose; a tube and 2. any of various tubular or cylindrical objects, parts or formations. 

It defines tube as:

…1. a hollow usu. cylindrical body of metal, glass, rubber or other material, used for containing or conveying fluids, and for other purposes…

19.      For these reasons the Tribunal finds that the goods can be described as tubes and pipes, and can be classified under subheading 7411.  The appropriate classification is 7411.29.00: copper tubes and pipes: other.

HOW SHOULD THE GOODS BE CLASSIFIED?

20.      As more than one heading is available the Tribunal is required to follow Interpretation Rule 3 in Schedule 2, which provides that relevant Section and Chapter Notes are to be followed:

3.   …

(a)The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

…

(c)When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

21.      In Cody (Collector of Customs) v Datacraft (Australia) Pty Ltd (1989) 19 ALD 145 Northrop and Keely JJ said that it is necessary to determine which item has the more specific determining qualities or features describing the goods. Burchett J stated at 151 :

The question how specific a description is can only be answered by considering the extent to which the description reduces the area within which the thing described is to be identified.  That depends very much on the range of things from which it is to be distinguished.

22.      Subheading 7403 refers to Refined copper and copper alloys, unwrought, which includes a wide range of products described by Mr May such as ingots and alloys in the casting process, copper powders, copper anodes for electroplating, slabs, bars, rods, pump components and cast sculptures.  Unwrought goods of this description differ from other similar goods that are wrought.  Subheading 7411 refers to Copper tubes and pipes, which defines the goods according to their shape as described in Note 1(h), and distinguishes such goods from goods having a different shape.

23.      The Tribunal is satisfied that a description of tubes and pipes, where shape is the main criterion, is more specific than the general description of goods that are unwrought.  Therefore subheading 7411 is to be preferred to subheading 7403 and there is no ambiguity.

SHOULD THE HARMONISED SYSTEM EXPLANATORY NOTES BE USED?

24.      The tariff classification system needs to be considered in the context of the International Convention on the Harmonised Commodity Description and Coding System 1983.  This Convention, to which Australia is a signatory, aims to promote the uniform interpretation of terms used in customs legislation.  The Interpretation Rules in Schedule 2 were drafted having regard to the Convention.  The Convention also includes explanatory notes (also known as the harmonised notes) which are not incorporated into Schedule 2.

25.      In Gardner Smith Pty Ltd v Collector of Customs (1986) 66 ALR 377 and Barry R Liggins Pty Ltd v Comptroller-General of Customs (1991) 32 FCR 112 the Full Federal Court held that decision-makers may consider the harmonised notes as an aid in the classification process in the event of ambiguity but 0cannot displace the plain words of the statute.

26.      In view of the Tribunal’s findings that subheading 7411 is to be preferred to subheading 7403 and there is no ambiguity, there is no need to refer to the harmonised system explanatory notes in this instance.

DECISION

27.      The Tribunal affirms the decision under review.

I certify that the twenty-seven [27] preceding paragraphs are a true copy of the reasons for the decision of:

G.D. Friedman, Senior Member

(sgd) Mara Putnis

Associate

Date of hearing:  20 February 2008
Date of decision:  3 March 2008
Advocate for applicant:                Mr L. Gross
Solicitor for applicant:                  Gross & Becroft Lawyers

Advocate for respondent:           Mr R. Northcote

Solicitor for respondent:              Australian Government Solicitor